Barrick targets potential of South American projects

First-quarter results reveal that senior gold producer Barrick Gold (TSE) enjoyed greater earnings, revenue and cash flow, compared with the same period in 1994.

Net income rose 18% to US$71.1 million on revenue of US$307.2 million for the three months ended March 31, compared with US$60.4 million on US$189.8 million for the same period a year ago.

At the annual meeting, management indicated that prospects for growth may be better than previously imagined. This growth will be fueled by the properties and mines acquired with the purchase of Lac Minerals.

Indeed, the Lac assets are already having a positive effect on Barrick’s balance sheet.

During the first quarter, former Lac operations contributed more than 220,000 oz. to Barrick’s total quarterly production of 710,431 oz., at an average operating cost of US$178 per oz.

Last year at this time, Barrick had four producing mines and another project under development. As a result of the successful takeover of Lac, the company now has 11 producing mines and three other projects at various stages of development. This makes it the largest gold miner outside of South Africa and perhaps the world’s most profitable producer of the precious metal.

Of particular benefit to Barrick are Lac’s El Tambo and El Indio mines in Chile. The former recently began operating as an independent mine and should contribute significantly to the company’s bottom line in 1995. Figures for neighboring El Indio show that the mine produced more than 50,000 oz. at an operating cost of US$97 per oz. in the first quarter.

Production from both operations in 1995 is expected to top 345,000 oz., a 58% increase over 1994.

With the Lac acquisition, Barrick acquired 13 million oz. of reserves and 13 million oz. of resources, of which 8.8 million oz. and 11 million oz., respectively, were found on the Indio property. At the time, Barrick felt it might be possible to upgrade half of the resources to reserves. Since then, Barrick has completed additional exploration and now anticipates that all of the resources will be converted to reserves.

Over the next two or three years, Barrick will spend $500 million as part of a long-term, comprehensive development program similar to the plan used to develop the Goldstrike property in Nevada.

The senior is also determined to expand into other South American countries, having already opened exploration offices in Argentina and Bolivia. Towards this end, Chairman Peter Munk referred to the 1990s as “the decade of Latin America.”

As a result of the new focus, the company has tripled its exploration budget and plans to spend most of these funds in South America. Other significant exploration plays are in Argentina, Peru and Bolivia.